BETHESDA NORTH MARRIOTT HOTEL & CONFERENCE CENTER BETHESDA, MD

2

Contractor Personnel Personal Conflicts of Interest

Breakout Session Terry Raney, Senior Vice-President

CACI International

5 November 09

3

FY09 National Defense Authorization Act Section 841

Ethics Safeguards Related To Contractor Conflicts of Interest

• OFPP Administrator To Develop A Policy To Prevent Personal Conflicts of Interest (PCI) By Contractor Employees Performing Acquisition Functions Closely Associated With “Inherently Governmental Functions” Including The Development, Award and Administration of Government Contracts

4

Policy Requirements• Provide A Definition Of Personal Conflict of Interest

As It Relates To Contractor Employees Performing Acquisition Functions Closely Associated With Inherently Governmental Functions

• Require Contractors To:– Identify and prevent employee PCIs– Prevent employees with access to non-public government

information from using it for personal gain– Report PCI violations to the CO or COR – Maintain effective oversight to verify compliance– Implement procedures to screen for potential PCIs– Take appropriate disciplinary actions when employees fail to

comply with established policies

5

Policy Requirements (cont)• Develop a personal conflicts of interest clause or set of clauses

for solicitations, contracts and task or delivery orders (above the simplified acquisition threshold) that sets forth policies and contractor responsibilities

• In consultation with the Office of Government Ethics review the Federal Acquisition Regulation (FAR) to:– Identify contracting methods, types and services that raise

concerns for potential organizational conflicts of interest (OCI) and personal conflicts of interest

– Determine if revisions to the FAR are required to address PCI and OCI by contractor employees with respect to functions other than acquisition functions closely related to inherently governmental functions

– Achieve sufficiently rigorous, comprehensive and uniform government-wide policies to prevent and mitigate organizational conflicts of interest in Federal Contracting

6

FAR CASE 2008-025• Preventing Personal Conflicts of Interest by Contractor

Employees Performing Acquisition Functions• Implement Sec 841(a) of the FY09 NDAA (Pub. L.110-417). Sec

841 requires OFPP, within 270 days after enactment (14 Oct 08), to develop and issue a policy to prevent personal conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental functions for or on behalf of a Federal agency or department. Implementing clauses must take effect 300 days after the date of enactment.

• FAR Parts – 3, 52, 52.203

• Status– 10/15/2009 Proposed FAR rule to FARSEC for preparation

of FR notice.

7

FAR 7.503 (d)

d) The following is a list of examples of functions generally not considered to be inherently governmental functions. However, certain services and actions that are not considered to be inherently governmental functions may approach being in that category because of the nature of the function, the manner in which the contractor performs the contract, or the manner in which the Government administers contractor performance. This list is not all inclusive:

8

FAR 7.503 (d) • Services that involve or relate to budget preparation

including workload modeling, fact finding, efficiency studies and should cost analyses

• Services involve or relate to reorganization and planning activities

• Services that involve or relate to the development of regulations

• Services that involve or relate to the evaluation of another contractor’s performance

• Services in support of acquisition planning• Contractors providing contract management

assistance

9

FAR 7.503 (d) (cont)• Contractors providing assistance in the development

of statements of work• Contractors providing support in preparing responses

to FOIA requests• Contractors in situations that permits them to gain

access to confidential business information • Contractors providing information regarding agency

policies or regulations• Contractors participating in any situation where it

might be assumed that they are government employees or representatives

10

FAR 7.503 (d) (cont)• Contractors participating as technical advisors to a

source selection board or participating as voting or nonvoting members of a source evaluation board

• Contractors serving as arbitrators or providing alternative methods of dispute resolution

• Contractors constructing buildings or structures intended to be secure from electronic eavesdropping or other penetration by foreign governments

• Contractors providing inspection services• Contractors providing legal advice and interpretations

of regulations and statues to government officials• Contractors providing special non-law enforcement

11

GAO Report RecommendationsGAO-08-169 March 7, 2008

• Recommendation: The Secretary of Defense should direct the Under Secretary of Defense (Acquisitions, Technology, and Logistics), to develop and implement policy that requires personal conflict of interest contract clause safeguards for defense contractor employees that are similar to those required of DOD's federal employees.

• Recommendation: In developing its policy, DOD should include requirements for contractor companies to identify and prevent personal conflicts of interest for certain of their contractor employees who are performing contracted services that provide inputs to DOD's decision-making in such mission-critical areas as the development, award, and administration of government contracts and other advisory and assistance functions.

12

GAO Report RecommendationsGAO-08-169 March 7, 2008 (cont)

• Recommendation: In developing its policy, DOD should include the following requirements for defense contractor companies: require a written code of business ethics and conduct applicable to contractor personnel working on certain DOD mission-critical advisory and assistance type services to (1) prohibit contractor personnel from participating in a government contract in which they have a personal conflict of interest; (2) require contractor personnel to avoid the appearance of loss of impartiality in performing contracted duties for DOD; (3) require contractor personnel to disclose personal conflicts of interest to their employer prior to beginning work on these contracts;

13

GAO Report RecommendationsGAO-08-169 March 7, 2008 (cont)

• (4) require the contractor to review and address any personal conflicts of interest its employees might have before assigning them to deliver contracted services; (5) prohibit contractor personnel from using non-public government information obtained while performing work under the contract for personal gain; (6) prohibit contractor employees providing procurement support services from having future employment contact involving a bidder in an ongoing procurement; (7) impose limits on the ability of contractors and their employees on accepting gifts (defined as almost anything of monetary value, such as cash, meals, trips, or services) in connection with contracted duties; and (8) prohibit misuse of DOD contract duties to provide preferential treatment to a private interest.

14

GAO Report RecommendationsGAO-08-169 March 7, 2008 (cont)

• Recommendation: In developing its policy, DOD should include requirements for contractor companies to report any contractor personnel conflict of interest violations to the applicable contracting officer or contracting officer's representative as soon they are identified.

• Recommendation: In developing its policy, DOD should include requirements for contractor companies to maintain effective oversight to verify compliance with personal conflict of interest safeguards, and have procedures in place to screen for potential conflicts of interest for all employees in a position to make or materially influence findings, recommendations, and decisions regarding DOD contracts and other advisory and assistance functions. This screening can be done on a task-by-task basis or on an annual basis, such as a financial disclosure statement.

15

Advanced Notice of Rule Making26 March 08

• Professional Services Council Input– Took Issue With Implication That Contractor Employees

Don’t Have Suitable Ethics Rules Applicable To Them– A Personal Conflict of Interest Does Not Create an

Organizational Conflict of Interest – Two Separate Concepts– Any PCI Regulations Should Be Stand Alone FAR Coverage– Contractual Relationship Between Contractors and the

Government Must Be Respected– Responsibility For Implementation Should Rest With The

Contractor– Opposed To A Standard Clause

16

What Are Contractors Going To Need To Have In Place

• A PCI Screening, Identification and Management System That Will Be Subject To Compliance Audits and Reviews

• Corporate Policies On Employee Privacy Relative To Personal Financial Information– Who Will See The Information – How Will The Information Be Used– How Will The Information Be Maintained– How Will Employee Privacy Be Protected

17

Questions & Issues

• No definition of “acquisition functions closely associated with inherently governmental functions”– OFPP Will Have to Define

• Many Different PCI Clauses Already In Use• There Seems To Be A Desire To Combine OCI and

PCI As A Contractual Issue• How To Manage Employee PCI Certifications

Required By A Contract• Will Government Auditors Have Access To

Contractor Personnel Personal Financial Information?

18

DFARS Policy • 207.503 Policy.

• (e) The written determination required by FAR 7.503(e), that none of the functions to be performed by contract are inherently governmental—

• (i) Shall be prepared using DoD Instruction 1100.22, Guidance for Determining Workforce Mix; and

• (ii) Shall include a determination that none of the functions to be performed are exempt from private sector performance, as addressed in DoD Instruction 1100.22.

• (S-70) Contracts for acquisition functions.

• (1) In accordance with 10 U.S.C. 2383, the head of an agency may enter into a contract for performance of the acquisition functions closely associated with inherently governmental functions that are listed at FAR 7.503(d) only if—

• (i) The contracting officer determines that appropriate military or civilian DoD personnel—

• (A) Cannot reasonably be made available to perform the functions;

• (B) Will oversee contractor performance of the contract; and

• (C) Will perform all inherently governmental functions associated with the functions to be performed under the contract; and

• (ii) The contracting officer ensures that the agency addresses any potential organizational conflict of interest of the contractor in the performance of the functions under the contract (see FAR Subpart 9.5).

19

OCI & PCI Are Being Combined In Some Contracts

• Example Language That Combines OCI & PCI (Navy Solicitation) – The financial, contractual, organizational and other

interests of contractor personnel performing work under this contract shall be deemed to the interests of the contractor for purposes of determining the existence of an Organizational Conflict of Interest. Any subcontractor that performs any work relative to this contract shall be subject to this clause.

20

SUMMARY

• Proposed Rule On PCI Is Forthcoming – Let’s Hope It’s Not An Interim Rule

• PCI Policy And Clauses Will Be New Territory With Several Substantive Personnel And Legal Operational Issues To Address

• Contractors Will Have To Implement A New Compliance System

• Don’t Confuse OCI With PCI